In 1918, the Dartnell Corp. of Chicago published its first survey of business car allowances, practices and controls. Because of the nature of the car fleet industry, the problem of rising costs always has been foremost in the minds of fleet administrators. For this reason, each Dartnell survey contains information of special value to fleet managers.

In the next six months, AF through the cooperation of the Dartnell Corp., will present to its readers excerpts from Dartnell's latest survey, "Current Business Car Allowances, Controls and Fleet Management Practices."

The first article will focus on "Business Car management," The second article will deal with "Operating Costs." Other articles will be on "Maintenance and Repair," "Depreciation and Trade-ins," "Cost Control Programs," and "Training and Safety..."

Definable trends rather than major changes were indicated in this current Dartnell survey of business car allowances, ownership and operations. The effects of a business recession (Hopefully passing) could be noted in the increasing interest in cost control factors. However, it would appear that companies were meeting obligations to employee-operators of fleet cars-be they company-owned, leased, or employee-owned, by increasing allotments.

As the prime example, the mileage allowance paid to employees who operate their own cars on economy business is now a well-established 10¢ a mile. Some 66% of the nearly 1,100 respondents indicated that if they pay a mileage allowance it is 10¢ or more. Better than half (52%) pay exactly 10¢. Some 21% of the group paying a mileage allowance provide from 10.5¢ to 15¢ for each mile driven on company business.

In 1968 only 37% made the 10% rate as "most typical," and in 1964, the "most typical" rate was 8¢ a mile. This current survey reveals that only 12% of the respondents pay 8¢ a mile today.

STRAIGHT ALLOWANCE PAYMENTS

Slightly more than 23% of the companies reporting in the survey state that they pay drivers a straight monthly (or weekly) allowance. These allowances, of course, can cover company-owned cars, employee-owned cars and leased cars.

In line with the rising cost pictures, some 90% of the firms reported that they had made on upward adjustment in payments since 1968. Of that group, some 30% have made the adjustment in 1970, and 21% now indicate that they will adjust rates upward in 1971-72. For the purposes of this summary it would be difficult to project or estimate what the upward movement represented, although those talking in terms of mileage allowance indicate raises from 8¢ or 9¢ a mile to 10¢ a mile, with a strong number reporting increases of this allowance from 10¢ to 12¢.

BUSINESS FLEET BACKGROUND

To set the picture for the remaining sections of this summary report, it should be pointed out that the near 1,100 questions returned represented slightly over 201,000 business cars-company-owned, employee-owned, and leased.

Of this group 100,500 are leased (which represents exactly 50% of the total number of cars). Some 74,370 are company-owned automobiles (no trucks or vans), and 26,130 cars are employee-owned and driven. For this summary report, the number of companies operating mixed fleets was not broken down, although this is a majority figure by estimate.

VEHICLE OWNERSHIP

In order to confirm stated trends in ownership, Question 2 and Question 3 in the survey sought information about recent (within 2 years) and proposed (near future) changes in ownership. It was found that a strong 10.2% of the companies have changed from employee-owned to leased cars during the past two years, and another 8.8% have changed from company-owned to leased cars during the same period. This would appear to validate what the leasing people are saying about current trends in ownership (claiming on annual growth of 15%). On the subject of future plans, some 7.5% said they plan to more from company-owned to leasing in the "near future," and some 7% said they plan to move from an employee-owned fleet to a leasing arrangement.

For the breakdown within other areas on this subject:

Have you converted (within two years) from....

Employee-owned to company-owned.......... 4.8%

Leased to company owned........................... 4.3%

Company-owned to employee-owned.......... 0.3%

Leased to employee owned.......................... 0.3%

 

Are you considering (near future) Changing from....

Leasing to company ownership........................ 4%

Employee-owned to company-owned............. 2%

 

CHANGE IN VEHICLE SELECTION

This year, some 14% of the respondents indicated that they are considering a change in either the make or model of car within their fleets (company-owned or leased cars). Of this particular group, 54% are considering a new make, and 87% are talking about changing models. The larger second figure indicates a combined change of make and model or type (standard, intermediate, compact).

What could be a reflection of the cost consciousness of business is the fact that 60% of those changing types of vehicles report they are considering the change from standard size to intermediate. This figure, it must be remembered is based on the total response of 14% of the reporting universe (which means about 150 companies involved).

Other changes in types of cars are indicated below:

Compact to standard................. 2.6%

Intermediate to compact............ 1.7%

Standard to compact................. 2.6%

Compact to standard................. 6.0%

Intermediate to standard......... 12.0%

Other changes............................ 6.9%

It should also be noted that while 60% are (considering) going from standard to intermediate, another 12% are going the other way, and another 6% are going from compact to standard. It should also be noted that standard sized cars for and away comprise the bulk of most fleets.

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SIZE OF CARS IN FLEETS

To offer some idea of the type of vehicles used in fleets (primarily the company-owned and leased fleets) some averages were struck as to standard, intermediate and compact cars. To offset an imbalance created by fleets of from 2,000 to 5,800 and fleets or under 10, we ran the averages excluding fleets of 500 cars or more and less than 10. Here are the results:

AVERAGE NUMBER IN FLEET

Company-owned

Standard size  Executives.............. 14

                        Salesmen................ 75

                        Others.................... 49

Intermediate    Executives..............   3

                        Salesmen................ 36

                        Others.................... 12

Compact          Executives..............   3

                        Salesmen................ 21

                        Others.................... 41

Employee-owned

Standard Size  Executive...............   8

                        Salesmen................ 19

                        Others.................... 16

Intermediate    Executive................. --

                        Salesmen................   9

                        Others...................... --

Compact          Executive................. --

                        Salesmen................   6

                        Others...................... --

Leased

Standard size  Executive............... 10

                        Salesmen.............. 150

                        Others ................... 85

Intermediate    Executives............... --

                        Salesmen................ 38

                        Others........           110                                               

Compact          Executives............... --

                        Salesman................. 5

                        Others..................... 9

For the sake of clarity in this area, it should be pointed out that the term "executive" is construed to mean sales managers, regional managers, district managers, etc, as well as (president, VP, board chairman) executives.

NAFA PURCHASING SURVEY

It might be valuable at this point to refer to the September, 1970 report on 1971 Fleet Purchasing Plans as provided by the National Association of Fleet Administrators, Inc. This very recent survey (covering 149 fleets-mostly very large) offers this information.

The trend for intermediate-size cars has slowed down, at least for the moment. In the 1970 survey they accounted for 26% of the planned acquisitions; and for 1971 they have grown to 27%. Standard-size cars have regained some of the ground they lost in the 1970 survey. They will account for 72% of the 1971 acquisitions as compared to 70% in the 1970 survey.

The statistics in the Dartnell survey have been double checked to make sure that there had been no accounting error. There wasn't! Points to remember here are:

  1. The 60% figure in this case is based on a group of 106 companies who detailed a model change. Of this group, 60 indicated that they are considering the move from standard to intermediate.
  2. The type of company and the size of fleet in this survey is demographically much different than the association members as a whole. Close to 20% of the company-owned fleets (for one example) are less than 10 in number.

With the business picture as it developed in 1970, it would appear quite reasonable that smaller fleet operators are considering the operation of more economical vehicles. There is a very definite cost consciousness in all corporate areas, and fleet operations cannot be looked at as immune.

LUXURY CARS

The top executives still rate the "Luxury" car in about 45% of the companies reporting. Chauffeurs are less visible this time around for the survey (limousine drivers), but the big cars are three.

Cadillac still leads the herd-ranging from limousines to the Coup De Villes with a healthy sprinkling of Broughams. The Continental holds its own in second place with the Mark its own in second place with the Mark III getting most of the play. Next in line is the Buick. Here the 225 is the leader with Riviera running second. The Olds 98 shouldn't be slighted either. In some cases, the car-such as a Buick-is noted to be "loaded with extras," as an added incentive. There are also a very small sprinkling of Chrysler New Yorkers, Rolls Royces, Porsches, Mercedes, and Thunderbirds.

It should also be added that most of the "luxury" cars within these fleets are company-owned. Those that are leased are usually (but not always) the Buicks and the Oldsmobiles. Also very important is the "pecking order" of Luxury cars-the Cadillac for the president, the Lincoln next, then the Buick or the Olds 98. Of course, in some cases the Continental leads the list. Another point that company size dictates the number of cars in the luxury fleet as well as the types of cars. In some reports, the president will drive a Ford LTD or an LTD Brougham.

POWER PLANT AND TRANSMISSION

According to the current survey 93% of all cars within the business fleets are eight cylinder models. This is an increase of 8% over the figure (85%) established in the last survey. It should also be noted that 99% (by actual count) of all these cars have automatic transmission. This is an increase of 11% over the previous survey.

Approximately 6% of the cars are six cylinder models and 1% are fours. Interestingly enough, those driving six cylinder cars have automatic transmission in only 70% of the reports.

STANDARD EQUIPMENT

Probably the biggest news in the field covering equipment is the fact that this current survey indicates that 61% of the companies consider air conditioning as a standard fleet car feature (excluding Canadian entries). This was the answer given in Question 9. It does not necessarily indicate that the unit will not be paid for by the operator, but in fact this is the basic case in the large majority. This is a jump of 21% over 1968.

The NAFA Survey of 1971 Purchase plans (referred to in reference to size cars) indicates that 56% of the total group involved in that survey (149 fleets) state that air conditioning is being ordered as a standard option on every car at no expense to the operator. This survey universe comes nowhere near the size of the Dartnell survey in number of responses, although it covers more than half the number of cars (135,000 as compared to 201,000), so a large number of smaller fleet operators show interest in air-conditioned vehicles.

The other revelation was the fact that 50% state that power brakes are standard on fleet cars. This is in sharp contrast with the 28% reported in the NAFA survey. Tinted glass (reported on about 37% of the NAFA questionnaires) was said to be standard on 50% of the cars in the Dartnell survey. Here is a good indication, however, that tinted windshields are part of the parcel when you have air-conditioning.

The other equipment which can be compared includes radios (94% Dartnell - 88% NAFA) and power steering (94% Dartnell-93% NAFA). In the current survey, respondents also report that 19% of their fleets have disc brakes standard and 39% feature whitewall ????.

It was indicated that where a choice is offered, it is offered to 70% of the executives, 36% of the salesmen and 18% of the "other" drivers-service men, delivery, etc. If you ask which of the options discussed are given as an operator's choice, the majority of companies responding to this question say all for executives, followed by whitewall tires, air-conditioning and power brakes. A similar all answer was listed for the majority salesmen who have the option, flowed by power brakes, whitewalls, tinted glass and air conditioning. At this point many respondents pointed out that air conditioning was one option that was offered of additional cost or at cost to the salesman. For the "other" drivers, most firms said that options mostly involved additional cost to the driver.

AIR CONDITIONING POLICIES

Just how significant air conditioning is as an option today can be summarized by many of the statements offered in regard to company policy on this factor. The whole program can be best explained by the statement of one company: "It is a necessary option for greater productivity,"

But for others, here are representative comments (other than "It is standard").

"Air conditioning is required in the warmer regions-ignored in the Northwest."

"..$100 cost to the driver over the life (3 years) of the car-payable in advance." (leased vehicles)

"Charge is $75 south of 1,500° line, $150 between 1,000° and 1,500° line, and $200 north of 1,000° line." (leased vehicles)

"Furnished to all salesmen, and to others south of the Mason-Dixon line." (leased vehicles)

"On all vehicles operating in Virginia and south, air conditioning is standard equipment on company-owned and leased vehicles. On all other salesmen cars, the operator must pay for A/C."

 

MILEAGE

If you like statistics, you could note that the 201,000 business cars counted in this survey are driven an average 20,546 miles a year each or some 4.13 billion miles. To be more specific, and more practical, the

[PAGEBREAK]mileage counts can be broken down in the following manner:

 

AVERAGE ANNUAL MILEAGE

Company-Owned Cars

Executives                    16,497

Salesmen                      27,776

Others                          16,958

Employee-Owned Cars

Executives                    16,621

Salesmen                      25,656

Others                          14,808

Leased Cars

Executives                    17,606

Salesmen                      27,390

Others                          21,606

OPERATING COSTS

The cost-per-mile of operating a business car is actually an elusive figure, especially in a survey such as this. For one thing, some submit operating costs for variables (oil, gas, maintenance, etc) and others try to give total costs. For another, it is difficult to break out cars (mostly in the standard class) with and without air. A third point may or may not be considered as valid-the establishing of an extra cost for operating executive cars. When one considers the extra costs of premium gas, premium tires, air conditioning drag, etc, this may not be too far off. Still another factor is the variable cost of gasoline, maintenance, and such things as parking which exists from state to state and city to city.

STANDARD CARS

For the sake of uniformity, we are following the practice established some years back in showing operating costs. This is a cost-per-mile basis which is normally quoted, and the 1968 figures are included in the table below to help establish a base for comparison:

OPERATING COST PER MILE (STANDARD CARS)

Company-Owned Cars

                                  1970          1968

Executives                11.5¢           9.4¢

Salesmen                    8.5¢           8.1¢           

Others                      10.0¢         10.0¢

Employee-Owned Cars

Executives                   10¢           8.1¢

Salesmen                       9¢           8.6¢           

Others                         10¢           8.5¢

Leased Cars

Executives                10.0¢           9.8¢                       

Salesmen                    9.5¢           7.8¢

Others                        9.0¢           8.7¢

INTERMEDIATE CARS

There were enough responses to the questionnaire indicating operating costs of intermediate cars for the table on page 10. There is no comparison because no figures were developed for this group of cars in 1968. Operating costs for compacts, by the way, were available for employee-owned cars in the current survey. Respondents indicated that salesmen using compacts spend 8¢ a mile and others spend 9¢ a mile. There were no available (or accountable) figures for company-owned or leased cars in this category.

OPERATING COST PER MILE

(Intermediate Cars)

Company-Owned Cars

Executives                         10¢

Salesmen                             8¢

Others                               10¢

Employee-Owned Cars

Executive                            9¢

Salesmen                             9¢

Others                              N/A

Leased Cars

Executives                        N/A

Salesmen                             8¢

Others                              8.7¢

Figures compiled to present a picture of running costs only would indicate about a 4.5¢ a mile average currently. This is an increase from the 3.4¢ established in the 1968 survey. This compares well with a generally released figure by Runzheimer and Company which estimates the cost (gas/oil, maintenance, tires) at 3.95¢ on a 1969 Chevrolet which was run 10,000 miles-8 cyl., auto/trans., power steering.

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As an excellent example of a program covering leased cars for a year, see the example in a future part of this series. It clearly indicates how the variable costs-gas, oil, maintenance, repairs, etc.-affects the average cost per mile. It also shows how the increase of 1¢ for gas and oil can affect operational costs.

MAKE OF VEHICLES

As it was indicated in this current survey, the first choice of automobile for the majority of companies is Chevrolet (especially in the salesmen group) followed by ford and Plymouth cars. The 1968 survey was identical. Within the company-owned group, about 43% are Chevrolets (for salesmen) with 29% Fords. Within this group, management (sales, district, etc) drives Buicks and then Oldsmobiles. Chevrolets and Fords (in that order) are driven by "others."

Chevrolet would seem to be the favorite car of salesmen in the employee-owned group with Ford next in line. Cadillacs are favored by executives in this group. In the leased cars category, some 48% of the companies choose Chevrolet for salesmen and 26% use Fords.

Within the company-owned segment the model choices run-impala, Bel Air, Galaxy, in one-two-three order. Within the leased group it is Impala and Galaxy in one-two order.

TRADE-IN POLICIES

In terms of the trade-in policies of the majority, the average respondent would operate the cars between 50 and 60 thousand miles or two years. In individual cases mileage ranges much higher in some reports, and the number of years also increased-three and four being next most popular a choice. As a point of interest, some 31% of the companies use years only and 20% use mileage only. Almost 45% of the companies indicate that they trade at the end of two years (leasing influence).

Local dealers are usually given the opportunity to bid on company-owned cars if they are not employees first. In the large majority of cases, the leased cars are retuned to the leasing companies, although here again, employees may be given the opportunity to buy the car-often at a good price.

As a matter of fact, more than 60% of the companies either sell the cars to employees or have an arrangement with the leasing company to sell the cars.

DEPRECIATION

There has been some change noted in depreciation methods since the last survey-a larger number of firms using a longer number of years in establishing straight line depreciation. More than half the companies still use the straight line method and a goodly number still follow the 2% per month concept, although a growing number were giving 2.25% up to 3% as their newly established figure.

As has been the case in previous surveys, the large variety of methods has been the key point of the question. As an example, here are 10 statements taken from 10 questionnaires in a row with no connecting factors or operations:

"Half of fleet -2%; other half 2.5%"

"2.5% per month"

"Runzheimer: rates revised annually based on current year model prices."

"Sum-of-the-years-digits over 36 months."

"The accelerated tax schedule."

"The accelerated tax schedule-4%

Per month for first year; second year is cost less depreciation taken the first year and 4% per month of balance for the second year."

"Double declining balance-3 year life."

"2.5%"

"Double Declining Balance."

"Straight line-no salvage value-4 years."

MAINTENANCE

Cost control is in evidence in the close supervision given to fleet maintenance programs in the current survey. Whether the car is company-owned or leased, the driver normally receives a set of regulations and instructions covering maintenance which must be observed. Of course, some firms have maintenance leases, but this is still not the general case. In the majority of cases the driver is held accountable for the maintenance of his vehicle.

Monthly vehicle reports are required in many cases, and all drivers are expected to maintain the warrantees scheduled by manufacturers.

INSURANCE

One thing fleet operators agree on is full coverage for employee-drivers on company business. The vast majority hold $100/$300 liability and damage policies with medical coverage and, to a large extent $100 deductible on collision. There appears to be a growing number who carry large amounts on fleet policies--$200/$500 and $500/$1 (and more) and quite a few with $1 million blanket coverage.

Only a smattering of companies ask for $50 deductible on collision policies today, and several carry $200 deductible. Coverage, needless to say, is extended to include employee-owned cars as well as company-owned vehicles and leased cars. In many cases me leasing company handles the insurance program.

SAFETY AND EDUCATION

Although companies are cost conscious and interested in controlling expenses, only 14% indicate that they operate any type of a driver's training or safety program internally. What might be indicative is that 9% of the total number responding state they are considering some type of program.

COMMERCIAL VEHICLES

According to this 1970 survey, 63.6% of the companies responding indicate that they operate commercial vehicles. This is a significant jump from the 45% indicated in the 1968 survey.

According to the breakdown, 58% of firms with commercial vehicles own them. Approximately 33% lease them, and 9% lease and own these vehicles.

CONCLUSION

The above report covers the basic information gained from the first run through of the 1,100 questionnaires received before September 15.

Subsequent data received, which included details from many company programs details from many company programs as well as information from additional questionnaires, provided the basis of the 1971 Dartnell Study. In addition to material gained from questionnaires and company programs, the study also includes material from the National Association of Fleet Administrators, the Federal government, and leasing companies.

 

 

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